Central Banks

ECB meet Thursday 12 September 2019 – preview

A preview of the European Central Bank meeting this week via TD. Further easing is widely expected (more previews below).

We’re on the dovish end of expectations, looking for a 20bps rate cut, alongside the introduction of a tiering system, as well as €40bn/month of QE

We’re more comfortable with our forecast for a more aggressive rate cut, but there’s a lot of uncertainty around the call for QE, given the push-back from some of the more hawkish Governing Council members

And, via Daiwa:

  • given the extreme current policy settings, the precise measures which the Governing Council will take, however, are highly uncertain. 
  • We currently anticipate a package along the following lines: 
  • A further interest rate cut seems inevitable, not least given the change to rate guidance in July. But the size of the rate cut is difficult to predict with confidence. We forecast a reduction of 20bps in the deposit rate, to -0.60%, a slightly larger cut than is currently priced in to the market. 
  • To mitigate possible negative side-effects on the banking sector, we also expect the ECB to announce a new tiering framework for reserve remuneration. 
  • To demonstrate the ECB’s willingness to do whatever it takes to achieve its inflation target, and as a full policy package combining rate cuts and net asset purchases should be considered more effective in boosting inflation than a sequence of selective actions, we also expect the Governing Council to approve a new QE programme….  we think …  a new programme of net asset purchases, of about €30bn per month lasting through to end-June 2020.


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